Staples: The city should move ahead on new arena without Katz
We don’t need a location agreement to secure an NHL team, we need a new arena.
For live coverage of Wednesday's city council meeting about the arena, go to edmontonjournal.com at 1:30 p.m. You can spar with columnists David Staples, John MacKinnon and Paula Simons in our live chat or track them on the #yegarena Twitter hashtag; link to the meeting livestream; vote in our polls and catch up on our past arena coverage, including our recent analysis of how arena deals in other cities stack up against Edmonton's.
EDMONTON - Now that Edmonton Oilers owner Daryl Katz has refused to come to city council on Wednesday, the current downtown arena deal is dead. And that’s the way it should be.
The framework for the deal — agreed to last October in New York by Katz and Edmonton Mayor Stephen Mandel — was fair. After a long, bitter and public fight, it garnered strong support with the public and city council. It would bring us a downtown arena, greatly boost the city core, and secure NHL hockey here at a reasonable price.
Katz should be pleased to sign it. It went a long way to meet his needs, including having him put in his $100 million over time, not up front. In fact, for all the Katz Group’s talk of investing $250 million in this project, it’s not putting up any upfront money into the $450-million to $470-million arena.
Yet even with such concessions, the Katz Group’s demands only seemed to grow, now reaching unreasonable proportions.
There is next to zero public will to give a better deal to the Katz Group. I’ve certainly not seen a solid business case suggesting the city should do much to sweeten it.
In fact, having talked to local insiders in the know about NHL economics and arena politics, I’m convinced if Katz doesn’t reconsider and accept this offer, city council should build a downtown arena on its own.
With negotiations collapsed for now, here are a few things to keep in mind:
* The NHL wants the Oilers in Edmonton. Why would commissioner Gary Bettman and Katz’s partners want to see a team leave a good market and move to a city where revenues are uncertain? They’d rather have a team pay into revenue sharing, not take from it.
* Edmonton isn’t as big as Pittsburgh or Seattle, but there’s also no major sports competition here. There’s no NFL or NBA or Major League Baseball or massive college teams to suck up sports dollars and media coverage.
This is a large and wealthy market of hockey fanatics. The Oilers made $17.3 million in 2010-11, making Edmonton the fifth most profitable team in the NHL, according to Forbes magazine. Local experts also say the team makes about $20 million a year, partly due to the club’s new and lucrative regional TV deal.
* There’s a valid concern that the Canadian dollar might again tank, making Edmonton a weaker hockey market. So, yes, it’s risky for the Katz Group to sign a 35-year no-movement clause to secure the Oilers in Edmonton, as has been contemplated in this arena deal.
Here is how Katz frames the problem in his new letter to council: “Before we can sign a 35-year location agreement and invest more than a quarter-billion dollars into a new arena that the city will own — let alone invest more than $1 billion into other private development around it — we need a solution that makes economic sense for both parties and creates a sound basis for the long-term sustainability of the Oilers in Edmonton.”
But there’s a simple solution here: Axe the location agreement.
Instead, offer Katz a shorter term lease in a new arena, based on the current market. If the Edmonton market turns sour, Katz can try to get a better lease deal or move the team.
But Edmonton is a strong hockey market for now. The Fort McMurray oilsands have also driven Alberta’s economy forward, even as the rest of North America has struggled. Our long-term prospects are solid. This bodes well for Edmonton as an NHL market.
It’s certainly clear that it’s no longer in the public interest to push Katz for a location agreement if it means taxpayers must pay some additional massive, annual subsidy to the Katz Group.
* Just because Pittsburgh and Winnipeg gave sweet deals to their teams, it doesn’t mean Edmonton should. There are 30 arena deals. Some arenas were built entirely with private money, some entirely with public money. The NHL average for public/private arena financing is about 50/50, which is roughly the cost split between the Katz Group and the city in the agreed framework. Looks fair to me.
* A major problem for the Katz Group is that they haven’t effectively engaged the public in this debate. They’re far too insular. If they had talked more and listened better, this might have prevented them from making such mistakes as threatening to move to Seattle, an insulting notion to Oilers diehards. Instead, they appear to talk among themselves about the deal and how they can make it better for themselves. But, at this point, they’re drinking their own bathwater and convincing themselves it’s Perrier.
* The Katz Group may well decide not to go ahead with its $1 billion in various developments around the arena. That’s fine. That’s their call, their problem, not the city’s problem.
The city’s job is to make sure there’s an excellent downtown arena for concerts and an NHL team, to make sure any public financing of that arena is in the public interest, and to ensure the building is designed well so an entertainment district will grow up around it. With or without the Katz Group, the city should move ahead on this project.
If Katz and the Oilers ever left here, 10 other NHL owners would line up to get into this market, but only if we have a new downtown arena.
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